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Managing Reputational Risk

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A simple approach to Reputational Risk Management

A simple approach to Reputational Risk Management

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  • 1. Managing reputational risk Eneni Oduwole Jan. 2009
  • 2. Contents
    • What is reputation?
    • Attributes of reputation
    • How can reputation be damaged?
    • What is reputational risk management?
    • Attributes of reputational risk management
    • Benefits of reputational risk management
    • Managing reputational risk
    • Rating reputational risk
    • Indicators of levels of reputational risk
  • 3. What is reputation?
    • It is :
      • an intangible asset
      • not a brand
      • the sum total of all stakeholders’ experience
      • public information regarding an organization’s trustworthiness
    • It also assures:
      • premium value growth opportunities to shareholders (value growth resulting from managerial experience, innovation, intellectual property)
      • continued comparative advantage
  • 4. Attributes of Reputation
  • 5. How can reputation be damaged?
    • Actions that result in stakeholders lose of trust and confidence
    • Public perception of organization’s standards drop
    • Sudden change of management; no succession planning
    • Adverse regulatory reports and sanctions
    • Increased incidences of fraud
    • Consistent unfavourable ratings
    • Continued decline in share price
  • 6. What is Reputational Risk Management?
    • It is the current and prospective impact on earnings and capital arising from negative public opinion
    • It measures the change in perception of a company
    • It is linked with customer expectations regarding an organization’s ability to conduct business securely and responsibly
  • 7. Attributes of Reputational Risk
  • 8. Benefits of Reputational Risk Management
    • Identifies key risks that can affect an organization's reputation adversely
    • Assesses potential impact
    • Ensures timely and appropriate response to adverse public criticisms
    • Enables a good work culture is promoted by Management
    • Ensures effective communication and disclosure to all stakeholders
    • Promotes commitment and trust between all stakeholders
  • 9. Managing Reputational Risk
    • Understand the value of the organization's reputation
    • Treat reputational risk management holistically; understand inter-relationships within the business
    • Have effective internal control & enterprise risk management frameworks
    • Identify and prioritize relevant risk factors; communicate key risk areas to Management
    • Ensure that an effective business continuity management plan is in place
    • Build a culture of recruiting excellent people and effective people management practices
    Value your Customers
  • 10. Rating Reputational Risk
    • Reputational Risk can be rated as:
  • 11. Indicators of levels of Reputational risk
    • Indicators of Low risks include:
    Management fosters a well supported sound culture across the organization Management fosters a well supported sound culture across the organization
  • 12. Indicators of levels of Reputational risk (co’td)
    • Indicators of Moderate / Medium risks include:
    Management fosters a well supported sound culture across the organization The firm adequately self-regulates its risks Losses from fiduciary activities are manageable (whether no. of accounts, volume of assets, increased litigation or customer complaints)
  • 13. Indicators of levels of Reputational risk (co’td)
    • Indicators of High risks include:
    Management fosters a well supported sound culture across the organization
  • 14.